In re Maii Section 12C, Ngatangiia; In re Cook Islands Motels Ltd [1985] CKHC 10 (1 April 1985)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(LAND DIVISION)

IN THE MATTER of

MAII SECTION 12C, NGATANGIIA.

AND

IN THE MATTER

of a Deed of Lease dated 21 June 1963 now vested in
COOK ISLANDS MOTELS LIMITED

Date of hearing: 19 March 1985
Date of Judgment: 1st April 1985

Mrs T. Kauvai for landowners
Mr T. Clarke for applicant

JUDGMENT OF DILLON J

This is an application by Island Hotels Limited for whom Mr Clarke appeared to determine the unimproved value of the above land as at the 18th day of June 1983. Mrs Kauvai represented the owners but was not able to produce any evidence of comparative values to assist the court in making a determination.

For that reason I took the unusual course of personally inspecting the site, not because I questioned Mr Clarke's submissions or description of the property in question, but rather because, the owners in this case have no representation and were for this reason at a disadvantage which I hoped a personal inspection might correct. In actual fact, and as expected, my inspection confirmed the accuracy and fairness of Mr Clarke's description of the property.

The area of this section is 2 acres 3 roods with a road frontage of 76.15 metres and a lagoon frontage in excess of 135.79 metres. It is a flat section and its size and location at the end of Muri beach makes it an outstanding site for Hotel or Motel development. Mr Clarke concedes this and indicated that the Lessees did not wish to undertake development of the section but would be amenable to negotiations with the owners on the Lease and offered to assist the owners in this regard.

It is clear to this court that the owners could receive considerable advantage in the more intensive Hotel or Motel development of their property. However that is a separate issue for the owners and the Lessee to discuss and consider.

Turning now to the valuation. The section is situated at the end of the Muri Beach district - it does not have a direct view of the motus as say the Harnish or Nicholas sections - however a motu is visible. On this point while a view out over the motus may be considered attractive to some it really is a matter of opinion. For example the fact that there are two motus opposite the Polynesian Motels or the Rarotongan Hotel does not detract in any way from the very attractive sitings of those two Hotels.

Mr Clarke referred to the beach area and the lack of a sandy bottom for swimming. That is quite correct. The lagoon at this point is a continuous coral sea bottom which would detract considerably from the point of view of swimming. On the other hand the secluded beach is really most attractive visually. It is a small beach half the frontage being taken up by this section. There appear to be 3 other small sections fronting onto it. The crescent shaped beach has an outcrop of black rocks at each end and a small outcrop in the centre which with the wide white sand provides an exclusive secluded and most attractive private beach cut off from the main Muri Beach itself. Its proximity to the Muri Beach proper enables the court to use values established in that area for comparative purposes. Set out below are the relevant details of the Nicholas - Harnish - and Worthington properties:-

	Road frontage metres	Lagoon frontage metres	Area	Value	Date	Rental per acre per annum	Value per acre
Nicolas	20.00	27.50	1100m²	7,000	1/4/83	1,400pa.pa	28,000
Harnish	33.13	30.72	4720m²	30,000	1984	1,400pa.pa	30,000
Worthington	68.24	55.00	3.2.10p	71,250	30/11/80	1,017pa.pa	20,360
Island Hotels	76.15	135.99	2.3.00
Little Polynesian	40.00	40.00	2250m²	15,900	1/5/83	1,590pa.pa	30,000

Mr Clarke also referred to the per acre per annum valuations of the Rarotongan Hotel at $1,000 fixed as at 1/3/82; the Edgewater Hotel at $875 as at 1/3/84: and the Beach Hotel at $890 as at 1/10/84.

On the basis of those comparative figures Mr Clark suggested a fair rental per acre per annum would be $750 and for the total area of 2 acres 3 roods an overall rental of $2,062.50p.a. This capitalized would establish a land value of $41,250.

That suggested rental of $750 is very substantially less than-the figures ranging from 1017 to 1400p.a. p.a. quoted above.

If valued on a per acre basis using the range of $21,000 to $30,000 set out above for this block with an area of 2 acres 3 roods the land value is between $57,750 and $82,500.

If valued on a Rental per acre per annum basis and using the range of $1,000 p.a p.a. to $1400 p.a.p.a. A capitalized land value of between 55,000 and 77,000 is established for the present block.

However there is a third method of cross checking which can the easily used on this particular section. From the comparative table earlier set out it will be seen that this section has a road frontage nearly four times bigger than the Nicholas section; twice as big as the Harnish section; and bigger again than the Worthington section. Frontage on to the lagoon, where the real value of a section is sited, the difference is even more marked. This section has a frontage in excess of 135.79 metres (that is the measurement in a straight line) whereas the other three have 27.50; 30.72; and 55.00 respectively. The area plus the extensive frontage onto the lagoon and the considerable road frontage allows for a shadow subdivision to provide a cross check on comparative values.

Again referring to the Schedule above the ¼ acre values average out at $7,000 each. Using that figure as a basis and a generous discounting of 15% because of the disadvantaged swimming facilities, I arrive at the following calculations –

Value per ¼ acre	=	7,000 sea frontage
Less 15%		1,050
		5,950

Frontage allows 7 sections x 5,950 = 41,650

Value per ¼ acre @ ½		3,500 main road
Less 15%		525
		2,975

Frontage allows 4 sections x 2,975	=	11,900
Total		53,550

Summarized the three methods of calculation produce

(a) per acre - between 57,750 and 82,500

(b) per acre per annum between - 55,000 and 77,000

(c) discounted subdivision - 53,550

I concede that from a swimming point of view this section has disadvantages to Muri sections and the others referred to by Mr Clarke. On the other hand this is a large area with a long road frontage and a much longer lagoon frontage – all very rare qualities in land on Rarotonga that I am repeatedly told by counsel appearing on these valuation matters. I have been told that Blocks of this size are indeed a rarity on the Island. Mr Clarke often refers to the real difficulties with lack of adequate road frontage into the Beach Hotel and Edgewater Motel. Finally this Beach frontage provides an exclusivity which would be very advantageous for any Hotel or Motel development.

Allowing for the disadvantage of a swimming beach and taxing into account those factors to which I have just referred I assess a Rental of $1,090 per acre per annum which, is a figure practically the same as the Worthington property (but which was valued at 30/11/1980) and less than the Nicholas and Harnish figures of $1,400 per acre per annum. Related to this area this produces a land value of $60,000 and a total rental of $3,000 as at 1/6/1983.

Judge